Chapter 2 and Chapter 3 of Microeconomics

1.A.2

Read chapter 2

Before beginning this assignment, please read chapter 2 and refer to it as you form your answers. Do the best you can without using the internet to help you find answers.

Consider Figure 2 in Chapter 2. This is a graph of the Production Possibilities Frontier. Refer to it as you answer these questions.

• Define production possibilities frontier.
• What are the two goods being produced in Figure 2?
• What combination of goods is produced at:
  • Point A
  • Point B
  • Point D
• Explain why it’s inefficient to produce at point D.
• Explain why it’s impossible to produce at point C.
• Jack has 10 acres of land. On 1 acre, he can grow 1 bushel of apples or 1 bushel of oranges. Jill also has 10 acres of land. On 1 acre, she can grow 1 bushel of apples or 3 bushels of oranges.
  • Draw a PPF that shows all of the different combinations of apples and oranges that Jack can produce.
  • Draw a PPF on a whole new graph that shows all of the difference combinations of apples and oranges that Jill can produce.

Now, watch the assigned video called “The Production Possibilities Frontier.” Then, complete the next question

1.A.3

Read Chapter 3

Before beginning this assignment, please read chapter 3 and refer to it as you form your answers.

Jack has 10 acres of land. On 1 acre, he can grow 1 bushel of apples or 1 bushel of oranges.

Jill also has 10 acres of land. On 1 acre, she can grow 1 bushel of apples or 3 bushels of oranges.

• Define absolute advantage.
• Which producer has the absolute advantage in producing apples? Explain how you know.
• Which producer has the absolute advantage in producing oranges? Explain how you know.
• Based on the theory of absolute advantage, do these producers have an incentive to trade?
• Define comparative advantage.
• Before you can determine the comparative advantage in apples, you’ll need to calculate each producer’s opportunity cost of 1 apple so that you can compare them.
  • What is Jack’s opportunity cost of producing 1 apple? Show your work and/or explain how you know.
  • What is Jill’s opportunity cost of producing 1 apple? Show your work and/or explain how you know.
  • Which one has the comparative advantage in producing apples?
• Before you can determine the comparative advantage in oranges, you’ll need to calculate each producer’s opportunity cost of 1 orange so that you can compare them.
  • What is Jack’s opportunity cost of producing 1 orange? Show your work and/or explain how you know.
  • What is Jill’s opportunity cost of producing 1 orange? Show your work and/or explain how you know.
  • Which one has the comparative advantage in producing oranges?
• Based on the theory of comparative advantage, do these producers have an incentive to trade?